The way reverse mortgages – both the Federal Housing Administration (FHA) sponsored Home Conversion Mortgage (HECM) and various proprietary options – fail to meet many of the diverse needs of today’s American seniors, particularly when it comes to debt Who Have They Have Many seniors are already saddled with before taking out such a loan. This is one reason for the lack of widespread use of reverse mortgage lending postulated by the financial website MarketWatch in an article published last weekend.
In addition to other industry and product-related issues such as the reverse mortgage penetration rate, which is low compared to conventional forward mortgages, and the requirements for the occupancy and perception of borrowers, which have depressed the volume over the past two decades, debt is highlighted as one Main obstacle to the widespread adoption of reverse mortgages according to the piece.
“[T]There is also evidence here that reverse mortgages inherently do not suit retirees’ needs as well as they could, ”the article reads. “One of the biggest barriers preventing more Americans from taking out a reverse mortgage is the fact that they are already burdened with a lot of debt. A few decades ago, around 20% of Americans over 65 had a mortgage; today it is over 40%. As a result, it is not surprising that paying off existing mortgage debt is one of the main motivating factors for many seniors in opting for a reverse mortgage. “
A primary reason some prospective reverse mortgage borrowers are initially ineligible for the loan is significant pre-existing residential debt, according to the article. If a home has a sizeable mortgage balance, it is said that the reverse mortgage must be placed in the first lien position, which could adversely affect the proceeds to which the borrower has access.
This is compounded by the existing FHA limits on how much equity can be drawn out of a home by using an HECM, as some seniors are making a potential reverse mortgage more difficult than it’s worth.
“It’s that catch-22 of me to be carrying more mortgage debt into retirement, but carrying more mortgage debt into retirement actually makes it harder for me to get something like a reverse mortgage,” said Stephanie Moulton, a researcher Ohio State University has spoken to MarketWatch about reverse mortgages in the past.
One possible solution to this type of problem could be the new product announced from Finance of America Reverse (FAR), “EquityAvail,” a hybrid forward / reverse mortgage that FAR has described as an option for a senior who is already trying to refinance their existing mortgage into something that works for someone who is looking to Prepared for the transition, it makes more sense to live on a fixed income.
However, the difficulty of finding a reverse mortgage solution for a senior borrower who could benefit from it is compounded by the lack of large financial institutions in the field and the need to rely on an “obscure broker” to leave that you haven’t heard from before or [a lender you] just saw advertisements [for] on TV, ”Moulton told the point of sale.
Additionally the 2013 Demise The small dollar “HECM Saver” loan can be seen as a further restriction on access, although researchers like Moulton believe that a potential future small dollar HECM is in the same way as the HECM Saver, the article says.
read this items at MarketWatch.